EMIs lose tax clearance under state aid

HMRC’s recently published, and usually routine, Employment related securities bulletincontains an important announcement on the future of EMI share options. It transpires that the EU state aid approval for the EMI share options scheme expired on 6 April 2018, and the government has yet to obtain a renewal agreement from the EU. HMRC’s bulletin was only published on 4 April 2018 and therefore provided almost no notice to those affected by this announcement.

We are told that the government applied to the European Commission for fresh approval last year but is still awaiting the Commission’s final response. HMRC has confirmed that as this approval had not been received before 6 April 2018, those involved in the establishment of EMI schemes and grant of EMI share options could be severely affected.

HMRC have said that as it currently stands any EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received, may not be eligible for the usual tax advantages. HMRC is advising companies to consider delaying the grant of employee share options intended to qualify as EMI share options, until fresh EU State Aid approval has been given.

HMRC says they will continue to apply the relevant tax advantages to EMI share options granted up to and including 6 April 2018. Whilst it is not clear if this delay is related to Brexit, it is likely that the UK is at the ‘back of the queue’ in getting a response and no date has yet been published as to when we can expect this issue to be resolved. HMRC has promised to provide an update in due course…